Business secretary Vince Cable believes changes to the employment tribunal system will benefit employers and taxpayers. Photograph: David Gadd/Allstar

The amount of time an employee has to work for an organisation before he or she can make an unfair dismissal claim against the employer has doubled to two years, in a move the government says will boost growth but unions say will result in a "hire and fire" culture.

Anyone taken on before 6 April who feels they have been unfairly dismissed will still be able to make a claim after just one year of employment, but new employees will be subject to the two-year rule. The change will not affect cases where dismissal is automatically judged to be unfair because someone has been sacked for trying to exercise their employment rights – these can still be brought at any time.

The change is part of a package of reforms that the government claims will directly save businesses £10m a year, and could deliver wider benefits worth more than £40m annually. It says the changes will make it "easier for businesses to take on staff and improve the process when staff have to be let go".

Other changes include allowing judges to sit alone in unfair dismissal cases, where previously they sat with a panel of lay members; allowing witness statements to be provided in writing; and doubling the maximum amount businesses can be awarded in costs for a vexatious claim to £20,000.

There were 218,000 tribunal claims in 2010-11, a rise of 44% since 2008-09, but down on the 2009-10 figure of 236,000. Just under a quarter of cases taken to tribunal in 2010-11 involved a claim for unfair dismissal, while more than half involved alleged breaches of the working time directive.

The government estimates that defending a claim costs a business an average of £4,000, while the taxpayer faces a bill of £1,900 for each claim.

The business secretary, Vince Cable, said: "For too long now the system in place for employment tribunals has been a bloated and bureaucratic obstacle for employers and the taxpayer. For employers they were finding that weak and vexatious cases were too much of the norm, too easy to bring forward, while for the taxpayer they were proving ever more expensive to run.

"We have seen claims drop in the last year and we want to see this continue as we introduce alternative measures in the coming months helping both parties resolve workplace disputes."

Groups representing employers have welcomed the change, claiming it will give smaller companies, in particular, more confidence to take on staff.

Neil Bentley, deputy director general of the CBI, said: "It will be a particular boon for young people and those who've been out of work, as it will give them longer to demonstrate their value to employers."

John Longworth, director general of the British Chambers of Commerce, said: "Dismissal rules are a major barrier to growth for many businesses. The majority of small businesses have ambitions to grow, and this will boost their confidence to hire."

But unions warn that it could lead to a hire and fire culture. The TUC has warned that 2.7 million people will be at increased risk of losing their jobs, and that far from helping younger workers, it could actually have a detrimental effect as they are likely to be the workers with the shortest employment history.

The TUC general secretary, Brendan Barber, said: "The government's proposals to weaken unfair dismissal rights risk generating a hire and fire culture in the UK and will lead to the creation of insecure employment that is here today and gone tomorrow.

"Cutting back on protection against unfair dismissal will do nothing to boost the economy. If people are constantly in fear of losing their jobs it will lead to even less consumer spending, and losing your job is one of the worst things that can happen to anyone, especially when unemployment is so high."

• Who is affected by the new two-year rule?

Anyone taken on by an employer from 6 April 2012. If you are already employed, you qualify to take a claim against that employer after one year.

• What types of claims are not affected?

Any unfair dismissal claims that involve someone being sacked simply for trying to exercise their employment rights: for example, for opting to take full maternity leave or refusing to work through one of the breaks they are legally entitled to. A full list is available on the Directgov site.

• Do employees have to pay to take a claim?

No, but the government wants to introduce a charge in 2013. It claims this will prevent people taking vexatious claims against employers.